5 Elite Companies To Research This Week

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Includes: AXP, BLK, DLTR, TMK, TWX
by: Benjamin Clark

Summary

AXP, BLK, DLTR, TWX, and TMK are all rated as undervalued by the ModernGraham valuation model.

All five qualify for the Enterprising Investor under the ModernGraham approach.

BLK and TMK also qualify for the Defensive Investor.

ModernGraham currently covers over 350 companies in its Valuation Index, analyzing each in detail to determine whether they fit a modernized version of Benjamin Graham's conservative metrics from his classic The Intelligent Investor.

The site then proceeds to give each company a rating as suitable for Defensive Investors, those unwilling to conduct substantial research; Enterprising Investors, those happy to spend the time researching; or Speculators.

Each company is further analyzed using one of Graham's valuation formulas to determine whether it is undervalued, fairly valued, or overvalued by Mr. Market today.

The following five companies were found this week to be suitable for either Defensive Investors or Enterprising Investors (or both) and undervalued:

American Express Company (NYSE:AXP)

American Express Company is suitable for the Enterprising Investor, but not the Defensive Investor. The Defensive Investor has concerns with the high PEmg and PB ratios, but the company passes all of the Enterprising Investor's requirements. As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham's methods should explore other opportunities. From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.68 in 2010 to an estimated $4.63 for 2014. This strong level of demonstrated growth outpaces the market's implied estimate of 5.78% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham's formula, to return an estimate of intrinsic value well above the market price.

AXP Chart

AXP data by YCharts

BlackRock Inc. (NYSE:BLK)

BlackRock is an intriguing opportunity for both Defensive Investors and Enterprising Investors. The Defensive Investor's only initial concern is the high PEmg ratio, while the Enterprising Investor's only concern is the level of debt relative to the net current assets. As a result, value investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities. From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $7.69 in 2010 to an estimated $15.80 for 2014. This high level of demonstrated growth significantly outpaces the market's implied estimate of 5.85% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham's formula, to return an estimate of intrinsic value well above the price.

BLK Chart

BLK data by YCharts

Dollar Tree Inc. (NASDAQ:DLTR)

Dollar Tree is suitable for the Enterprising Investor, but not the Defensive Investor. The Defensive Investor has concerns with the lack of dividend payments and the high PEmg and PB ratios. The Enterprising Investor's only initial concern is with the lack of dividend payments. As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities. From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.14 in 2010 to an estimated $2.65 for 2014. This level of demonstrated growth outpaces the market's implied estimate of 6.04% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham's formula, to return an estimate of intrinsic value well above the price.

DLTR Chart

DLTR data by YCharts

Time Warner Inc. (NYSE:TWX)

Time Warner qualifies for the Enterprising Investor, but not the Defensive Investor. The Defensive Investor has concerns with the low current ratio, lack of earning stability or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor's only initial concern is with the high level of debt relative to the net current assets. As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities. From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $0.36 in 2010 to an estimated gain of $3.46 for 2014. This level of demonstrated growth outpaces the market's implied estimate of 7.93% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham's formula, to return an estimate of intrinsic value well above the price.

TWX Chart

TWX data by YCharts

Torchmark Corporation (NYSE:TMK)

Torchmark is an intriguing company for either Defensive Investors or Enterprising Investors. The company passes all of the requirements of each investor type, an impressive accomplishment. As a result, value investors following the ModernGraham approach based on Benjamin Graham's methods should explore other opportunities. From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.45 in 2010 to an estimated $3.71 for 2014. This strong level of demonstrated growth outpaces the market's implied estimate of 3.19% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham's formula, to return an estimate of intrinsic value well above the market price.

TMK Chart

TMK data by YCharts

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.